‘I’m ready for my golden years’: I’m 62. I’ve $350K in Roth accounts and $840K in annuities. I never want to work again. Can I afford it?

I am 62, single with no dependents. I own my smallish home outright and it’s worth $1 million due to the location. I own my car outright and I have no debt. My IRA and small Roth accounts have about $350,000 with an additional $840,000 in two guaranteed-income deferred annuities rolled over from a couple old 401(k)s in 2020. There’s $520,000 in my regular brokerage accounts (mostly Vanguard Index funds). I have $42,000 invested in two eReits and $10,000 in Series I Bonds. I have $71,000 in a higher-yield savings account and $12,000 in a checking account.

I had always planned to retire at 65 and live off my savings until filing for SSI between 67 and 70 (approx $3,400 to $4,100, depending on when I file). A year ago at 61, I abruptly quit a good-paying new job due to a bad work environment, and a week later, my elderly parent had a serious medical issue. I decided to take time off to help navigate care, and just be present — without all of the stress of a pretty demanding job. A year after quitting, I figured out that I have no desire to go back to what I was doing and, quite frankly, have to desire to work at all! 

So here (finally) is my concern. My expenses are at least $3,000 per month give or take. Given what I have in savings and no plans to file for Social Security Insurance for at least five years, what do I continue to live on, especially if I don’t go back to work? I most likely have some house expenses (new roof, garage door, etc.) in the near future, plus, I want to travel sooner than later so $71,000 won’t last that long especially with this inflation. Do I sell off some of my mutual fund shares to boost my savings? 

At some point (most likely in the next two years) there may be about $75,000 of inheritance, but I’m not factoring that into the equation for now. I think I’ve done almost everything right, and I’m ready for my golden years. I’m not afraid of running out of money long term. It’s the next five to seven years that are really causing me heartache. What are your thoughts?

Short-term Angst

Dear Angst,

Some initial thoughts: Smart decision on taking time off to take care of your parent. We only have one life, and most of us (if we’re lucky) have two parents and/or sometimes one good parent. If we are blessed with one or both, we need to take that time with them — if we can afford to — especially if their time is shortened or they have pressing medical issues. Thankfully, you had planned ahead, and you were able to afford to do so. 

Many people reevaluated their relationship to work in recent years. You did so because you gave up a job to be a caretaker. The most fortunate among American workers were allowed to work from home from 2020, and where their work was the umbrella that protected their financial life and gave them the funds to live their life, by the end of the pandemic, that umbrella became their life which gave them the ability to work. It’s a profound change.

I’m going to take a wild guess here — well, not so wild — and say that a lot of people are reading your letter with their mouths agape, with not a small amount of envy. There may (or may not) be a touch of humble bragging to your financial life, but to your credit you acknowledge that you are in a strong financial position at 62, and have endeavored to do everything right. That, I’m sure, involved sacrifices along the way. So bravo to you.

Meet with a financial adviser and work out your short- and long-term needs: what your income looks like before and after you tap your Social Security benefits. The good news is you have a healthy income awaiting you when you finally start drawing down money from your retirement accounts. It helps enormously that you have paid off your home — property taxes, insurance, food prices, car payments, health insurance, health insurance, gas, etc. notwithstanding.

Is it a good time to liquidate some of your mutual funds? The S&P 500 has risen 2.7% over the past year, and many people close to retirement have been spooked by stock-market volatility over the past three years, but it’s increased more than 30% since the last trading session of 2019 before the pandemic. Assuming you’ve been investing for the past three decades or more, and have experienced the miracle of compounding over that time, the time to enjoy your life is nigh. 

Withdrawing money for retirement

Randall Watsek, CFA, CFP and financial adviser with Raymond James, says you could cover a substantial part of your expenses from your brokerage account and Roths ($870,000) or annuities ($840,000). While you have done a great job in growing long-term assets, there are relatively few liquid, short-term assets (that is, emergency reserves), he adds. “For someone in retirement without earned income to draw on for living expenses, having at least five years of reserves might greatly lower their stress level.”

You say you want to take Social Security between 67 and 70. “From an average life expectancy basis, it works out roughly the same, whether you take Social Security at 62 or 70,” Watsek says. “You get more small payments if you take it earlier, or fewer large payments if you take it later. It works out the same on average. It makes most sense to delay Social Security if you have a family history of living into your 90s or 100s or if you’re still working.” But since you have no intention to return to work, he adds, you may want to think about starting to draw Social Security.

As my colleague Alessandra Malito points out, help comes in many forms: financial consultant, wealth manager and investment adviser. Choose a fiduciary who is required to act in your best interests (rather than giving you advice with one eye on your needs and another eye on their commissions). In order to become a certified financial planner or CFP, you must complete a certificate or degree program, 6,000 hours of related experience and have passed an exam. 

“Broker-dealers are advisers who primarily sell securities and often charge commissions on their recommendations. Commissions aren’t inherently bad, but clients should understand what they’re being charged for and feel comfortable with those fees before proceeding with the advice,” Malito writes. Certified public accountants, chartered life underwriters, certified employee benefit specialists respectively deal with accounting, life insurance and benefits.

You’re doing just fine. Your $75,000 inheritance will also give you some freedom for the next year or two, and help you get over the finish line. If you travel, think about Airbnb-ing
ABNB,
+2.18%
your home, which would cover your accommodation costs. It may also encourage you to try living in a place for a month or more. As a cardiologist might tell a patient when they’re putting them on medication for the first time, “Start low, go slow.” Take your time. Don’t make any big decisions.

As one member of the Facebook
META,
+2.98%
Moneyist Group said, “If you’re a man please marry me!” I’ll leave that with you with God’s and your fiduciary’s blessings.

Readers write to me with all sorts of dilemmas. 

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